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After spiking early last week to a level associated with the start of a bearish stock market, the Chicago Board Options Exchange Volatility Index, or VIX, is once more telegraphing a sanguine message for investors.

If right now it seems that too many crosscurrents exist in the world for you to be anything but hedged and on edge, well, you're in good company. Truth be told, you might not be paranoid enough. Recent trading by one major investor implies that he sees the VIX, now around 16.8, more than doubling by August.

Should that prediction prove prescient, the stock market will plummet before summer's end in a decline so violent that the recent market gyrations that frazzled so many bulls will seem like a pleasant day at the beach.

This ultra-bearish investor, whose identity is unknown, bought 108,000 VIX August $28 calls and sold 108,000 VIX August $37.50 calls when the fear gauge was just under 18. The call spread—that's the strategy of buying a call and selling another with a higher strike price and identical expiration—cost 60 cents, or $6.5 million total, when executed Wednesday.

Few investors ever trade more than 100,000 options contracts in a single transaction, so the trade casts a menacingly large shadow across the stock and option market. When VIX rises, VIX call options increase in value.

VIX above 20 is typically associated with a stock bear market. A reading above 30, some strategists contend, says VIX is pricing an economic recession. So far this year, VIX has rarely been above 20. On Monday, VIX set an intraday high is 21.91, and then promptly declined, generating a short-term bullish signal. (See The Striking Price Daily, "The Market Sends a Buy Signal (Really)," June 26.)

It is hard to imagine, based on the known unknowns hovering around the market, that the VIX call-spread trade proves profitable. VIX would have to rise by an extraordinary amount, and stocks would have to experience an extraordinary decline that seems highly unlikely, even when considering worries the Federal Reserve may taper its massive bond-buying programs sooner than expected. The VIX trade seems extreme even if you think second-quarter earnings season will challenge Wall Street's consensus view that the economy is improving. But who knows, maybe the mysterious investor is on to something.

In less than three weeks, CME's stock is up about 6%, and CBOE's stock is up 14%. CME's July $70 put, sold for $1.60, is now at 36 cents. CBOE's September $40 put, sold at $1.25, is now at 40 cents.

At this point, we'd suggest maintaining the long stock and roll the short puts. The prudent trade is buying to close the short puts and selling CME's December $42.50 put for $4.20 and CBOE's December $43 put at $2.20, or even the December $42 put for $1.85.

It is difficult to imagine that CME and CBOE stocks will remain anything but well-bid, as more investors discover that the exchanges are well-positioned to profit from tapering, and fear of tapering, and all the other hobgoblins that lurk in the shadows.